I tested this with MS Initialization 2.05 as well and did not receive this error message. Are there any errors on the iSCSI-R3 server? I tested with removing the Snapshot from the iSCSI-R3 Target Manager and tested with turning off Snapshot Task. Event ID 20 from M$ below.

Event ID 20
Connection to the target was lost. The initiator will attempt to retry the connection
This event is logged when the initiator loses connection to the target when the connection was in iSCSI Full Feature Phase. This event typically happens when there are network problems, network cable is removed, network switch is shutdown, or target resets the connection. In all cases initiator will attempt to reestablish the TCP connection.